Fundraising is difficult for all sorts of businesses. But it can get particularly tricky for startups.
As an entrepreneur myself, I know it from experience. And I respect everyone who wants to launch their own startup.
But like any other business, you will need capital to get your startup off the ground.
Now, if you’ve never done this before, it may seem intimidating. But on the bright side, it can be extremely rewarding too.
I know this because I’ve founded two companies and in that pursuit, I have learned many valuable things through trial and error.
So, if you’re someone who wants to launch a startup, these 10 tips will save you from having to take the scenic road that I did and help you get fundings faster.
10 Tips to Getting Startup Funding
Before you read these tips, know that raising funding is harder than ever. You cannot just come up with a “brilliant idea” and start knocking on investors’ doors.
You need to prove that your startup has potential. And in this article, I’m going to teach how to do just that (starting from step 1).
1 – Define Your Company’s Vision
It’s common to get excited about an idea and jump onto the funding bandwagon as soon as possible. When that happens, I want you to stop yourself and assess it first.
Specifically, here are some questions you should begin with:
- Is there a market for your services or product?
- Who are your target customers?
- Why should they buy your product?
From the above three questions, you should have a unique selling proposition statement.
Simply put, if you have unambiguous answers to all three questions, then you have a better chance of securing fundings for your startup. Although, defining the vision is just one part of the battle. The second half is to have a profitable business plan in place.
2 – Create a Profitable Business Plan
startups with business plans are twice likely to secure fundings, according to Tim Berry, founder of Palo Alto Software.
In fact, the majority of investors choose startups that provide high-demand products or services so that they can receive significant returns on investment.
Therefore, you must come up with a concrete business model that will help you do both – generate a profit & lead your startup towards growth.
Apart from the business model, you should also be aware of the competitive landscape you’re going to enter.
3 – Assess The Competitors
Most entrepreneurs launch startups because they want to make the world a better place. To be precise, they want to fill a gap in the market, while some just want to provide a better version of a product or services.
In either case, it is critical to evaluate the competition in the market.
By evaluating the competition, you can discover innovative approaches that can later serve as excellent pitch points. Moreover, investors are more likely to fund a startup that exhibits a competitive edge, innovation, and creativity.
Therefore, before building your product, identify your top competitors, analyze their products or services, and determine a unique edge.
4 – Find a Strategic Partner
“Two heads are better than one.”
According to this source, having a strategic partner can substantially increase the odds of success.
In fact, you’ll raise 30% more capital, have 3x user growth, and will be less likely to scale too fast if you have a strategic partner.
The point being? – Find a Strategic Partner!
Having a strategic partner can provide you the much needed directional insight, knowledge, and resources that are needed to take the startup to the next level.
5 – Build an MVP
So, you have defined the vision, you have come up with a profitable business model, and you have also found a strategic partner, now is the time to start leveraging your network to get funding, right?
You’re still missing one key ingredient. – a working prototype.
You see, investors are more inclined towards funding a startup that already has a working prototype or an MVP.
MVP or a Minimum Viable Product is basically a scratch product that has all the core features to cater to the early adopters.
And by having an MVP or a working prototype can demonstrate the potential of your startup idea to investors.
6 – Bootstrap As Long As You Can
I know it’s not what you wanted to hear. And technically, it sure isn’t a source of funding.
But the reason why I’ve mentioned this is that fundraising takes time and there is still no guarantee that you’ll get the funding you need.
So, instead of spending time pitching investors, spend it on acquiring your first 10 or 100 or 1000 customers.
You see, when you have a product and some traction, you won’t have to run around and beg for money. The investors will come to you.
In fact, there are lots of successful companies who never raised any funding and are still making millions in revenue today. GitHub, Basecamp, Shutterstock, and GoPro are the few examples.
7 – Seek Help from Friends and Family
Now, if you arrive at a point where your startup just cannot progress without external capital, try to get fundings from friends and family.
Friends & Family are the third on the top startup funding sources list. And the reason is that those are the people who believe in you and your potential.
So, when it comes to seeking external capital, don’t be afraid to ask your friends or loved ones for a loan.
The number one benefit of doing this is that you avoid paying interest.
Secondly, money from people you love can make you much more committed to success.
And lastly, your friends and family will be patient and stay supportive while investors might start breathing hungrily down your neck when you miss a deadline or two.
However, I understand that this cannot be an option for everyone. That means, you will have to reach people outside your network for capital.
So, in that case, you should have a brief summary ready that can get you funding as quickly as possible. Therefore, you should…
8 – Write a Strong Elevator Pitch that Fosters Investor’s Interest
Start with an elevator pitch.
An elevator pitch is a short description of your startup idea, that explains the concept in such a way that the listener can easily understand it.
In other words, your elevator speech should have the key points and but it shouldn’t be more than 60 seconds long. Typically, one to three sentences which have to be intriguing.
9 – Make a Compelling Presentation
If your elevator pitch has worked, then you shall be invited for a detailed presentation.
Now, it’s up to the presentation whether you secure the fundings successfully or being told “No sorry. We’re not interested”.
So, make sure that you create a compelling presentation that includes everything your investors need to know like the company’s overall goal, mission, team biographies, and outline what the investors will gain from funding your startup along with its timeline.
Once the presentation is ready, it’s time to go out and contact different kinds of investors.
10 – Explore Funding Options
Once your startup has a strong base, here are some funding options you can explore.
Incubators & Accelerators – Startup incubators and accelerators have sprung all across the world. These spaces are basically a part mentorship development and part communal workspace centers.
This option is a great start specifically for young startups. However, most startup incubators and accelerators mostly focus on tech-savvy startups. So, if you want to launch a tech-based startup, this option might be perfect for you.
Crowd Funding – If you’re great at marketing on social media, crowdfunding is another option you can look into. Crowdfunding has rapidly become a top way for entrepreneurs to secure fundings for their startups.
However, lots of startups are now aiming for crowdfunding, so you’ve to generate lots of buzz to make through the noise.
But, the best part about this option is that funders won’t get a say in how your startup is operated. Also, this option is only good for initial funding to get the startup off the ground.
Angel Investors – Angel investors are often entrepreneurs who have their own wealth and looking to fund startups that they believe are a good investment. These investors usually provide fundings in tens of thousands to hundreds of thousands of dollars.
However, unlike the crowdfunding option, Angel Investors usually demand equity in exchange for fundings.
Angel investment can be a good option for you if your startup is witnessing rapid growth.
Venture Capitalists – Venture capitalists or Venture investors are those who usually wants to make large returns by investing in startups. Unlike angel investors, Venture capitalists are not legally bound to ask their money back.
However, they’re very selective in startups they decide to invest in. That means, you cannot expect to secure fundings from them unless you have a good track record or demonstrated value.
So, if you’re just looking for initial fundings to get your startup off the ground, VC is not the option you should seek out for fundings.
Small Business Loans – Banks also provide financial backing if the entrepreneur has a solid business plan.
If the banking institution denies your loan application, you can also apply for a personal line of credit from them.
Overall, implementing these tips can greatly increase the chances of getting funds from any of the above options. However, you should always try to keep all costs as low as possible until you start making profits.
If you’ve any questions, please ask them in the comment box below. I’d be more than happy to help you out.
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